Net metering allows the customers to earn credits for the net excess generation (or NEG) from their solar panels. Excess electricity generated during the daytime is sent to the grid and is recorded if the house is net metered.
This will be credited against the electricity consumed during the nighttime. Customers are charged only for the net amount of electricity consumed from the grid.
Investment tax credits (or ITCs) are dollar-for-dollar reductions in an income tax bill. It is applicable to both residential and commercial deployment of solar systems.
The owners of the solar system are eligible for a maximum tax credit of 30% of their investment value in the applicable solar systems if their construction commences before December 31, 2019. Thereafter, the tax credit amount will gradually be reduced to 26% for construction in 2020, 22% in 2021, and a proposed 10% from 2022.
It is important for incumbent solar (TAN) companies like Sunrun (RUN), SolarCity (SCTY), Vivint Solar (VSLR), and Sunpower (SPWR) to plan their project execution accordingly to avail themselves of the maximum tax credits.
Solar renewable energy certificates
According to Renewable Portfolio Standards (or RPS), in some states utilities are required to produce a portion of their generation from solar generators. In the absence of such generation, utilities can buy SRECs (solar renewable energy certificates) from the market or solar panel owners to meet their requirements. One SREC corresponds to 1 mWh of solar electricity.
Apart from the above-mentioned benefits, owners of solar systems also enjoy accelerated depreciation on their solar assets. This helps in immediate reduction of the tax burden.
Other benefits include property tax exemptions and sales tax exemption in certain states. Also, some states offer cash rebates and state tax credits to promote installation of solar systems.
In the next part of this series, we’ll see how Sunrun expanded its business.